Bank account verification is an important part of compliance in many industries but is also becoming increasingly common in those which are not legally required to do so. Levels of fraud are rising and many companies are introducing bank verification as an added measure to protect both themselves and the general public.
As fraudsters leverage technology to perform more widespread and effective frauds, the fraud industry itself has undergone significant globalisation and scammers from across the world now target the UK.
Where verifying a bank account used to be a manual process, there are now new techniques and tools available to businesses that have been developed in response to the increasing sophistication of fraudsters.
What is bank account verification and why do we need it?
Bank account verification is the process of verifying that the person that you are dealing with is the owner of the bank account they provide or using it with the account holder's permission. It is an important part of a company’s defences against being defrauded and also serves to protect the general public as it makes it more difficult for criminals to fraudulently use the accounts of others.
Fraud is a huge business and takes place on an alarming scale, the National Crime Agency estimates that there were 3.7 million cases of fraud in the UK in 2022 and that 86% of these go unreported. Whilst it may seem strange that so many cases would go unreported, a victim of fraud is often embarrassed to have been fooled and is aware that there is very little chance of getting their money back.
The total value of money stolen in frauds in 2022 is estimated to have been £1.2 billion, which equates to around £2,300 every minute. Of which, £726.9 million was lost to remote banking, cheque, and payment card fraud. Bank account verification protects against these frauds and more widespread application could have significantly reduced this amount. Around £1.2 billion worth of fraud was stopped by the bank account verification and anti-fraud techniques of financial institutions in 2022.
Methods of bank account verification
As bank account verification relies on confirming that the person you are dealing with is the owner of the account they are trying to use, it is necessary to first confirm their identity. This can be done as a stand-alone ID check, also known as KYC, or as part of a company’s AML checking and onboarding process.
Microdeposits –This is where a small sum, usually 1p, is deposited into the supplied account. The drawbacks of this process are that it takes up to two days, which can slow down business. It also only checks that the bank account can perform transactions, which would be the case in fraud, not the owner of the account. Microdeposits do have a use as a way of checking a customer has not incorrectly entered their account details but not much more than that.
Manually review bank statements– An employee will manually review a bank statement provided by the customer to confirm the details match. This is perhaps the least secure method of bank account verification as it provides the most scope for human error and bank accounts are easily forged; adding to these vulnerabilities is the fact that fraudsters and money launderers are experts at deceiving people.
Credit check –The credit check technique involves checking the provided bank details against those held on file by a credit check bureau. The advantage of this technique is that it is instant and reduces human error, but its drawback is that the details held by credit check bureaus can sometimes be out of date.
Open banking– This technique leverages specialist software provided by open banking providers. The customer's details are entered into the open banking software, which then compares them to the details held on the bank’s systems in real-time. This technique is instant, uses the most up-to-date information available and reduces human error. Of all the techniques available for verifying bank details, open banking is the most accurate and reliable.
Benefits of bank account verification
Protect your company against fraud and money laundering– Financial crime is a very real problem and threat to modern business. Effective bank account verification techniques help protect companies against being exploited by criminals.
Protect the public– By making it more difficult for fraudsters to pay from highjacked bank accounts you are contributing to the larger fight against financial crime.
Increase customer confidence – The public is very aware of the risk of being made a victim of fraud or financial crime. By demonstrating that your company is security conscious, customers have more confidence that their information is safe with you.
Meet compliance regulations– Many sectors are required to perform bank account verification. By introducing effective techniques, tools and procedures companies protect themselves against sanctions for not meeting their regulatory requirements.
Bank account verification and Red Flag Alert Automate
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